Toplines

A Justice Department brief argues the ACA’s individual mandate and ban prohibiting insurers from denying coverage or charging people more based on their health must be invalidated by the courts

Trump administration court brief could lead to denial of coverage or higher premiums for the estimated 52 million Americans with preexisting conditions

Yesterday, the Trump administration’s Department of Justice dropped a bombshell in a rural Texas federal courthouse. The administration stated in a court filing (and also in letters to Congressional leaders) that it would not defend three key provisions of the Affordable Care Act (ACA). If the judge in the case agrees, millions of Americans with preexisting conditions could face denial of coverage or higher premiums.

The brief was filed in Texas v. Azar, a case brought in February by Texas and 19 other Republican-led states. Texas had asked the court to consider the provision of the ACA requiring individuals to have health insurance unconstitutional. It argued that the Supreme Court held that the mandate was unconstitutional in 2012 as a legal command, but upheld it as a tax penalty. When the 2017 Tax Cut and Jobs Act zeroed out the tax penalty amount as of 2019, the individual responsibility became entirely unconstitutional. Because the individual mandate is essential to the operation of all of the other ACA provisions, Texas argued, the entire ACA must be invalidated.

On April 26, 2018, the plaintiff states, joined by two individual plaintiffs, asked the court to enter a preliminary injunction invalidating the law. On May 16, the court granted 17 Democratic attorneys general, led by California, permission to intervene to defend the ACA.

On June 7, California and the other states with Democratic attorneys general filed their response to the preliminary injunction motion. California argued that the individual responsibility provision, though no longer enforceable as of 2019, remains constitutional. Moreover, Congress had no intention of repealing the rest of the law when it eliminated the individual mandate in 2017. As a result, the entire remainder of the ACA must be upheld, even if the court finds the mandate unconstitutional.

In its brief, also filed on June 7, the Justice Department abandoned its customary role of defending laws passed by Congress and took the side of Texas, agreeing that the mandate is now unconstitutional. The Trump administration also argued that the ACA’s guaranteed issue and community rating requirement, which ban insurers from denying coverage or charging people more based on their health, can only work in tandem with the mandate and must also be invalidated. The rest of the ACA can function without the mandate, the brief says, and should be retained. Tellingly, three career Justice Department attorneys withdrew from representing the United States immediately before filing the brief, apparently unwilling to sign their names to a legally questionable brief.

What are the ramifications of the Trump administration making these arguments? Nothing yet. The Democratic attorneys general are aggressively defending the ACA and the case probably won’t be decided until late summer or fall. But Texas handpicked the judge in the case, who has demonstrated his aversion to the ACA in othercases. There is reason to believe the judge may accept the Trump administration’s arguments.

If the judge buys the administration’s argument, and if his ruling is upheld on appeal, 52 million Americans with preexisting conditions could face denial of coverage or higher premiums. The administration’s argument would also allow insurers to charge women, older people, and people in certain occupations higher premiums. This policy change would jeopardize coverage not just for consumers in the individual market, but also people with preexisting conditions who have employer-sponsored coverage. If these people lost or left their jobs, they may not be able to get individual market coverage.

Insurers face a more immediate quandary. They are at this moment submitting their rates for the individual market for 2019. But those rates are based on community-rated, guaranteed-issue coverage. The Trump administration’s brief would eliminate those protections by 2019. How are insurers to prepare for this unknown future? The administration’s position is likely to destabilize an insurance market already struggling with repeated administration actions that have undermined the market. And hospitals and doctors face once again the prospect of more uninsured patients and higher bad debt and uncompensated care.

Regrettably, all of this turmoil is completely unnecessary. As California’s brief demonstrates, the individual responsibility provision is not unconstitutional at this point; it is simply unenforceable. And it has become apparent that, whatever may have been thought in 2010, the individual market can remain stable without the mandate. It is certainly clear that in zeroing out the individual mandate penalty in 2017, Congress did not mean to bar people with preexisting conditions from insurance.

Moreover, if the Trump administration did not want to defend the ACA expressly, it could simply have filed a jurisdictional motion, asserting that the states are not injured by the lack of an individual mandate penalty and that the litigation is not yet timely, as the tax is still in effect. It is hard to escape the conclusion that the brief is an attempt to use the courts to do what Congress was unwilling to do: repeal major consumer protections of the ACA.

Mission

The mission of The Commonwealth Fund is to promote a high-performing health care system that achieves better access, improved quality, and greater efficiency, particularly for society's most vulnerable, including low-income people, the uninsured, minority Americans, young children, and elderly adults.